Payroll Gains Aid U.S. Expansion Before Election
American employers added more workers than forecast to payrolls in October and a rush of people entering the labor force pushed the jobless rate higher, according to the last report on the labor market before next week’s presidential election.
Broad-based gains in employment -- from car dealers and hospitals to factories and construction sites -- indicate consumers are likely to spend more freely and shore up the three-year expansion in the face of a global economic slowdown and political gridlock in Washington over taxes and spending.
Hiring increased by 171,000 workers after a 148,000 gain in September that was bigger than first estimated, Labor Department figures showed today in Washington. October’s increase exceeded the most optimistic forecast in a Bloomberg survey with a median projection of a 125,000 gain. Unemployment rose to 7.9 percent.
“Jobs are expanding despite all this expression of business caution,” said Maury Harris, chief economist at UBS Securities LLC in New York. “You continue to see improvements in people’s perceptions of what’s happening in the job market.”
Private payrolls, which exclude government agencies, climbed by 184,000 last month, the most since February. They were forecast to advance by 123,000.
Stocks fell, erasing early gains, as Americans prepared to pick a president and assessed the damage from Hurricane Sandy. The Standard & Poor’s 500 Index declined 0.9 percent to 1,414.20 at the close of trading in New York after rising as much as 0.5 percent. The yield on the benchmark 10-year Treasury note was little changed at 1.72 percent.
Revisions added a total of 84,000 jobs to the employment count in the previous two months and brought average gains since June to 173,000.
One of those newly employed, Micaela Padilla from Columbus, Ohio, has been at work for about a week after searching since July. To help secure her position at the temporary agency where she works as a fund raiser for the Leukemia & Lymphoma Society, the 31-year-old took career classes at New Directions, a non- profit career counseling organization in her city.
“Looking for a job was challenging because when you really want to find something that fits you, you have to put in the leg work,” said Padilla, who dedicated 15 to 20 hours a week to the search. “It takes a lot of patience. I feel bad because so many people need a job.”
President Barack Obama campaigned today in Ohio, one of the battleground states that will decide the election. Noting that private-sector firms hired the most employees in eight months, he told a campaign rally in Hilliard, Ohio, that the country has “made real progress.”
“The American auto industry is back on top, home values and construction is on the rise, we’re less dependent on foreign oil than any time in 20 years,” Obama said.
Republican challenger Mitt Romney said the jobless rate in October was higher than the 7.8 percent figure when Obama took office in January 2009.
Forecasts for payrolls gains in the Bloomberg survey ranged from 30,000 to 154,000 following an initially reported 114,000 increase in September.
The unemployment rate, which rose from 7.8 percent in September, matched the Bloomberg survey median. Estimates ranged from 7.7 percent to 8 percent. The figures were unaffected by Hurricane Sandy because surveys of businesses and households were conducted before the storm struck.
Construction companies added 17,000 workers last month, the most since January. Factories added 13,000 people after a 14,000 decrease a month earlier, today’s report showed.
Detroit-based GM, the largest U.S. automaker, has said it will hire about 10,000 workers as part of its plan to bring more work in-house. The new so-called Innovation Center in Warren, Michigan, is one of four facilities planned in the U.S.
The auto bailouts have a central place in a political campaign entering its final days as Obama and Romney contend for votes in Ohio, where one of every eight jobs is tied directly or indirectly to the auto industry.
A University of Cincinnati poll released yesterday in Ohio showed Obama backed by 48 percent of likely voters, while Romney had the support of 46 percent.
Obama leads Romney by six percentage points in Iowa among likely voters and is out front by smaller margins in New Hampshire and Wisconsin, according to a NBC News/Wall Street Journal/Marist College published yesterday. The three states have 20 of the 270 Electoral College votes needed to win the White House.
Nationwide, the most recent polls suggest the race is in a dead heat.
A national ABC News/Washington Post tracking poll put Obama ahead by one point, 49 percent to 48 percent, within the survey’s margin of error of plus or minus three percentage points. The poll surveyed 1,293 likely voters from Oct. 28-31. An aggregation of national polls compiled by the website RealClearPolitics also showed a tied race, with each candidate at 47.4 percent.
Ronald Reagan is the only president to have been re-elected since World War II with a jobless rate above 6 percent. The rate was 7.2 percent on Election Day 1984, having dropped almost 3 percentage points in the previous 18 months. Through October this year, the rate has dropped 1.1 points in the same period under Obama.
Alison Cowley, 22, from Arlington, Virginia, started work in June at Appian Corp., a Reston, Virginia-based software developer, after graduating from the University of Maryland with a degree in mechanical engineering. She started her job search last fall and accepted the job in February.
“Searching for a job was definitely stressful for the first couple of months,” said Cowley, who saw the job posted on the university’s career site. “It was nice to have a job by February, it was a real burden off my shoulders.”
While employment improved last month, compensation lagged behind. Average hourly earnings climbed 1.6 percent in October from the same time last year, the smallest gain since comparable year-over-year records began in 2007, today’s report showed. Earnings for production workers rose 1.1 percent in the 12 months to October, the weakest since records began in 1965.
The gain in payrolls so far this year has averaged 157,000 a month, little changed from the 153,000 average for 2011. Monthly employment gains in 2010 averaged 86,000.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 14.6 percent from 14.7 percent.
Government payrolls decreased by 13,000 in October, today’s report showed. Retailers took on 36,400 employees, the most since April 2011. Temporary hiring rose by 13,600.
An improving labor market has boosted consumer confidence, helping to drive the biggest increase in household spending in seven months in September. Consumer purchases account for 70 percent of the economy.
The Thomson Reuters/University of Michigan consumer sentiment index rose last month to the highest level since before the recession began five years ago. The Conference Board’s index reached the highest level since February 2008.
At the same time, the weak global economy and the so-called fiscal cliff -- more than $600 billion of tax increases and budget cuts scheduled to take effect next year unless Congress acts -- have prompted some companies to begin cutting back.
Unless the cliff is averted, “it’s going to be a major hit to consumer spending that could knock the economy back into recession,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh.
“So we still have that dark cloud hanging over the economy,” he said. “If that cloud is cleared up a little bit, and I expect it will be, then yes, I think these gains can be sustained.”
Warning that they can’t combat a slowdown in growth caused by stricter fiscal policy, Federal Reserve officials said Sept. 13 the central bank would hold its target interest rate near zero until at least mid-2015 to stimulate more hiring. The Fed also began a third round of stimulus, buying $40 billion in mortgage bonds a month.
“Whether or not the Fed itself will view 7.9 percent unemployment as an all clear signal, I’m sure they won’t,” Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “You adapt by assuming they’ll continue to be dovish.”
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